Alcatel Lucent SA (NYSE:ALU) (BIT:ALU) announced its plan to reduce the number of its workforce worldwide to restore its profitability. The French network equipment manufacturer said it would cut 10,000 jobs or 14% of its global workforce by 2015 as part of the Shift Plan implemented by Michel Combes, new chief executive officer of the company.
Alcatel Lucent fixed cost savings
Alcatel Lucent SA (NYSE:ALU) (BIT:ALU) is committed to achieving a fixed cost savings of €1 billion or more than 15% of its fixed cost by the end of 2015. The company said it would accomplish its objective by reallocating its R&D investment to next generation technologies, reducing R&D expenditures in legacy technologies by 60%, and cutting administrative, sales, and support functions to bring SG&A costs in line with industry standards.
Alcatel Lucent SA (NYSE:ALU) (BIT:ALU) aims to reposition itself as a specialist in next-generation technologies of IP Networking, Cloud, and Ultra-Broadband Access.
In a statement, Combes said, “We launched The Shift Plan in June to give Alcatel-Lucent an industrially sustainable future. To carry out this plan we must make difficult decisions and we will make them with open and transparent dialogue with our employees and their representatives. The Shift Plan is about the company regaining control of its destiny.”
Alcatel Lucent reducing workforce
According to Alcatel Lucent SA (NYSE:ALU) (BIT:ALU), the workforce reduction will affect all geographic areas where it operates. The company said it would eliminate 4,1000 jobs in Europe, Middle East, and Africa, 3,800 positions in Asia Pacific, and 2,100 jobs in the Americas.
The French network equipment manufacturer said it would focus its industrial transformation towards R&D activities in new technologies including 4G and IP platforms in France. Alcatel Lucent SA (NYSE:ALU) (BIT:ALU) plans to create a new ‘small cells’ competency center in the country, and it would also concentrate on optics and strengthen the company in mathematics (the heart of next-generation network software). It would also concentrate its business activities in Villarceaux, which will serve as its primary R&D center in Europe and Lannion, which would specialize in ultra-broadband mobile access and subscriber data management (SDM) technologies.
Commenting on the planned workforce reduction of the company, Eric Beaudet, analyst at Natixis Securities in Paris said, “This is something Alcatel needed to do. The magnitude of the plan is big and shows the management’s resolve in rapidly executing its turnaround.”
The stock price of Alcatel Lucent SA (NYSE:ALU) (BIT:ALU) dropped by more than 8% to $3.52 a share at 2:50 P.M. in New York.